Hon Hai Precision Industry Co (鴻海精密) is seeking to reduce the amount it pays for Sharp Corp due to concerns about potential liabilities and future earnings, Japanese-language Yomiuri Shimbum reported. The Taiwanese company is also renegotiating terms with Sharp’s lenders, according to the Nikkei Asian Review.
Hon Hai’s investment in new equity to be issued by Sharp might shrink by 10 percent to 20 percent from the originally agreed ￥489 billion (US$4.38 billion) as it cuts the price per share from ￥118, the Yomiuri said, citing an unidentified person.
Sharp’s shares closed at ￥138 in Tokyo on Friday.
Hon Hai, known as Foxconn Technology Group (富士康) outside Taiwan, is also in talks with Sharp’s main banks, Mizuho Financial Group Inc and Mitsubishi UFJ Financial Group Inc, to reduce interest rates on ￥510 billion in credit lines and loans due at the end of March, the Nikkei reported, without saying where it got the information.
The Taiwanese company might be asking the lenders to accept less than the ￥100 billion it agreed to pay them for preferred shares in Sharp or to put off the purchases for the time being, the Nikkei said.
Sharp spokesman Yoshifumi Seki declined to comment on both reports when contacted by telephone yesterday.
“We have no new updates since Feb. 28,” Louis Woo (胡國輝), a spokesman for Foxconn Technology Group, said in an e-mail.
Calls to Mizuho and MUFG went unanswered yesterday.
Hon Hai’s ￥600 billion takeover of the struggling Japanese manufacturer has been stalled almost since Sharp’s board agreed to it last month.
Within hours, Foxconn said it would postpone finalizing the deal after new information provided by Sharp included about ￥300 billion in possible liabilities for restructurings and layoffs, people familiar with the matter said at the time.
Last week, Foxconn again said it would delay the agreement in order to review Sharp’s performance in the current quarter, people with knowledge of the matter said.
Foxconn’s lawyers and bankers have sorted through the contingent liabilities and concluded earlier this month they are likely not to require major changes in the board-approved deal, people familiar with the matter have said.
The Taiwanese company is taking extra precautions with the period’s financial results because of the last-minute notice about the liabilities, the people said.
Hon Hai reached a basic agreement with Sharp’s banks over a ￥300 billion credit line, the Yomiuri newspaper reported on Saturday, potentially clearing a hurdle toward the takeover.
Sharp’s board chose Foxconn’s bid over a competing offer from Innovation Network Corp of Japan (INCJ), a government-backed investment fund that planned to pay about ￥300 billion.
Sharp has forecast a ￥10 billion operating profit for the year ending March 31 and did not give net income or quarterly outlooks. The company would probably report a net loss of ￥23.9 billion in the final three-month period, according to an average of four analyst estimates compiled by Bloomberg.
The company has been losing money for years and its need for financial support set off the takeover battle between Foxconn and INCJ last year.
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